How do we price our house to sell?
Several years ago when we were in a seller’s market, pricing a home was as simple as checking comparable sales in the neighborhood and then listing your house slightly above the highest comp. That worked because there were many more buyers than sellers in the marketplace which created upward pressure on prices.
That way of pricing simply won’t work in our current buyer’s market. There are many more sellers than buyers, which is creating downward pressure on prices. In order to have a successful sale in this market, you need to use a method called “absorption rate pricing.”
With absorption rate pricing, you look at the entire market of homes that you could reasonably expect a potential buyer of your house to consider purchasing. Then you examine the last 6-12 months to determine how many homes on average have sold each month. This number is called the absorption rate. Then based on the absorption rate of homes in your area, you look closely at the competition (other homes for sale) to figure out where your house needs to be positioned in order to reasonably expect that your home will be one of the available inventory absorbed by the market with an offer.
For example, if the market is absorbing four homes per month, your home needs to be positioned among the four most desirable listings in terms of price and value for the dollar. Stray from the top four and you risk having your house ignored by potential buyers who know how to find the best value for their money.